The economic valuation of farm animal genetic resources: a survey of available methods

Genetic erosion of domestic animal diversity has placed 30% of the world's breeds at risk of extinction, often as a result of government policy/programmes. Conservation and sustainable development of animal genetic resources (AnGR) require a broad focus that includes the many ‘adaptive’ breeds that survive well in the low external input agriculture typical of developing countries. Environmental economic valuation methodologies have an important role to play in supporting decisions regarding which breeds should be conserved and how this should be done. However, AnGR, in general, and valuation methods in particular, have received very little attention. This paper provides a survey of the methods available for the valuation of AnGR and the steps that must be taken in order to test some of the more promising methodologies in practice.     

Differences in utility elicitation methods in cardiovascular disease: a systematic review

Aims: Utility values inform estimates of the cost-effectiveness of treatment for cardiovascular disease (CVD), but values can vary depending on the method used. The aim of this systematic literature review (SLR) was to explore how methods of elicitation impact utility values for CVD.

Materials and methods: This review identified English-language articles in Embase, MEDLINE, and the gray literature published between September 1992 and August 2015 using keywords for “utilities” and “stroke”, “heart failure”, “myocardial infarction”, or “angina”. Variability in utility values based on the method of elicitation, tariff, or type of respondent was then reported.

Results: This review screened 4,341 citations; 290 of these articles qualified for inclusion in the SLR because they reported utility values for one or more of the cardiovascular conditions of interest listed above. Of these 290, the 41 articles that provided head-to-head comparisons of utility methods for CVD were reviewed. In this sub-set, it was found that methodological differences contributed to variation in utility values. Direct methods often yielded higher scores than did indirect methods. Within direct methods, there were no clear trends in head-to-head studies (standard gamble [SG] vs time trade-off); but general population respondents often provided lower scores than did patients with the disease when evaluating the same health states with SG methods. When comparing indirect methods, the EQ-5D typically yielded higher values than the SF-6D, but also showed more sensitivity to differences in health states.

Conclusions: When selecting CVD utility values for an economic model, consideration of the utility elicitation method is important, as this review demonstrates that methodology of choice impacts utility values in CVD.     

Prospects for sustainable land-use policy in Germany: Experimenting with a sustainability heuristic

Land is an essential yet limited natural resource. Its current unsustainable use highlights the need for sustainability policies. In order to explore potential policy strategies, we use the concepts of stocks and durable institutions as tools for analysing temporal structures in nature and society. These concepts are incorporated into a heuristic aimed at reducing complexity and finding windows of opportunity for policy action. The heuristic is applied to current German land-use policy. We show that the German government is highly unlikely to achieve its declared sustainability goal to reduce the rate of land conversion to 30 ha/day by 2020. Analysis of the inherent dynamics of major stocks and institutions reveals that, even in a situation with stagnating or declining population, the inertia of institutions such as local municipal self-administration and the municipal financial system prevents the government's sustainability goals from being achieved.     

Majority cycles in a multi-dimensional setting

Summary. We consider a set of alternatives (electoral platforms, bills, etc. ...) defined as a Cartesian product of k finite discrete sets. We assume that the preferences of the individuals (voters) are marginally single-peaked and separable. The main result of this paper states that the pairwise majority relation satisfies these two properties but that it might exhibit several cycles. This result is important when related to classical problems of multi-dimensional decisions such as logrolling and vote trading. We relate our result with a continuous version of it (McKelvey, 1976). Received: March 21, 2000; revised version: April 12, 2001     

Evolutionary models in economics: a survey of methods and building blocks

This paper assesses methods and components of formal evolutionary-economic modelling. Methods are broadly classified into evolutionary game theory and selection dynamics, evolutionary computation and multi-agent models, each with relevant subcategories. The components or building blocks are organized into diversity, innovation, selection, bounded rationality, diffusion, path dependency and lock-in, coevolution, multilevel and group selection, and mechanisms of growth. The number of alternatives that has been proposed for each category is vast, making it difficult to comprehend the variety of assumptions and formalizations underlying existing evolutionary-economic models. Our survey aims to clarify for each model component the choice range, formal expressions, associated assumptions, and possible techniques for formalization. Our study is unique in that it provides more information about the formal details of specific model components and is considerably more inclusive than earlier reviews.     

Lexicographic expected utility with a subjective state space

This paper provides a model that allows for a criterion of admissibility based on a subjective state space. For this purpose, we build a non-Archimedean model of preference with subjective states, generalizing Blume et al. (Econometrica 59:61–79, 1991), who present a non-Archimedean model with exogenous states; and Dekel et al. (Econometrica 69:891–934, 2001), who present an Archimedean model with an endogenous state space. We interpret the representation as modeling an agent who has several “hypotheses” about her state space, and who views some as “infinitely less relevant” than others.     

A long-run cost allocation problem in the political economy of electric utility power pools

Summary and Conclusions Discussants of the electric power industry point to three principal reasons for corporately unaffiliated electric utility companies to establish formal interorganizational relations: optimal short-run dispatching of production facilities, the scale economies (more precisely, the subadditivity) of long-run costs, and the advantage of pooling the risk of equipment failure. This paper has analyzed the organizational properties of power pools established to realize the advantages of subadditive long-run costs. A formal organizational model of a power pool was presented, recognizing the economic and normative structure of a pool. The normative structure chosen was the subsidy freedom equity concept familiar in the literature on natural monopoly and in game theory. The principal result of the paper is the construction of a subsidy-free cost allocation rule for the deterministic multiple-technology long-run system planning problem.The applicability of this result depends on the organization of the power pool as an entity capable of contracting for the power needed by the members. Conspicuously in the model used here, the optimal poolwide cost is allocated but ownership of the generating plants is not.In power ppols of independently owned utilities (IOUs), capacity planning may be centralized but, with the exception of joint ventures in individual generating plants, ownership is maintained at the level of the member firms. IOU power pools allocate separately the fixed and variable costs of the system. Pool members often take turns in building new plants for the pool, thereby indirectly allocating system capacity costs. Having identifiable ownership in the generating plants, the members can allocate the energy costs of the system in a subsidy-free manner using the short-run marginal cost of energy established by central dispatching or energy brokering (Herriot 1985). But that is an approach to short-run energy charges which is very differet from the energy charge in the peaker rule studied here, and it may result in an allocation of total costs that is not subsidy-free.There are partnership among rural electric distribution cooperatives, called generation and transmission (G&T) co-ops, which do share costs without allocating ownership interests. G&T co-ops build generating plants or secure power contracts from IOUs sufficient to meet their members' requirements at an agreed level of reliability. Ownership of the plants, and liability for the contracts, is not disaggregated. Yet in most cases the G&T co-op does not sell power to non-members, so all costs must be allocated among the member firms.The ownership structure presumed here could also obtain under the scenarios for electric power deregulation envisioned by Joskow and Schmalensee (1983). If the distribution segment is disaggregated from generation and transmission, then locally franchised distribution firms mist face in common the subadditive long-run cost function discussed in the second section. The regional bulk power market would therefore have the structure of a natural monopsony, so the distribution firms would have an incentive to pool their forecast loads and collectively negotiate long-term power contracts with the independent generating firms. Ownership of generation would rest with the generation firms, but the cost of the regionally optimal portfolio of power contracts would have to be allocated among the pooled distribution firmsThe deterministic system planning model used here is somewhat simplistic, certainly as must any model to be admit a closed-form solution in a contexts where the real capacity planning problems are solved using very large scale linear programs and simulation. However, the cost allocation rule derived for this model may be useful guidepost for the development of practical cost-sharing rules in power pools. An important implication of the peaker rule (4) is the equity of not attempting to allocate separately the fixed and variable costs of a system. Though adjustments must be made to the peaker rule to account fully for the uncertainties, indivisibilities, unreliabilities, and nonhomogeneities faced by system planners, as well as for the growth of future loads and the development of new generation technologies, this cost-allocation rule appears to be helpful as a starting point in power pool rate design.     

“Almost” subsidy-free spatial pricing in a multi-dimensional setting

Consider a population of citizens uniformly spread over the entire plane. The population faces a problem of locating public facilities financed by its users, who face an idiosyncratic private access cost to the facility. We show that, under mild assumptions, an external intervention that covers a tiny portion of the facility cost is sufficient to guarantee secession-proofness or no cross-subsidization, where no group of individuals is charged more than the cost incurred if it had acted on its own. Moreover, we demonstrate that in this case the Rawlsian access pricing is the only mechanism that rules out secession threats.     

A comparison of contingent valuation method and random utility model estimates of the value of avoiding reductions in king mackerel bag limits

This paper estimates the value of king mackerel bag limit changes with both stated and revealed preference methods. The 1997 Marine Recreational Fishery Statistical Survey allows estimation of the value of avoiding bag limit reductions with the random utility model and the contingent valuation method. Using the contingent valuation method, the willingness to pay to avoid a one fish reduction in the bag limit is $2.45 per year. Using the random utility model, the willingness to pay to avoid a one fish reduction in the bag limit is $2.24 per trip and $7.71 for a two-month time period. Considering several methodological issues, the difference in willingness to pay between the stated and revealed preference methods is in the expected direction.     

Natural resource valuation with a tribal perspective: a case study of the Penobscot Nation

The unique settings of tribal lands and preferences of tribal members can complicate the effective application of standard natural resource use valuation tools within these tribal settings. We present a study which utilised referendum format contingent valuation methods to value foregone tribal use of the dioxin-contaminated Penobscot River in Maine. The Penobscot Nation’s prior experience in using referendums to evaluate cash settlement offers provides a unique setting for this application. The valuation responses pass a scope test and are consistent with a priori expectations of economic theory as well as individual attitudes and beliefs. Implicit discount rates based on the valuation of two clean-up periods are plausible. The response model indicates that cultural motives are a significant basis of foregone use values. While each tribal setting presents unique characteristics and challenges, the presented application demonstrates how carefully applied standard valuation tools, when appropriately designed to account for and incorporate tribal history, settings, and perspective, can yield defensible estimates of resource valuation.     

The principal-agent problem with a satisficing agent

The principal-agent problem is formulated with an expected utility maximizing principal and a satisficing agent. If the outcome set is finite and if there is only one aspiration level, then there are always optimal incentive schemes which can be represented by vectors having only the unique aspiration level and zero as coordinate values. The relation between the monotone likelihood ratio property and the monotonicity of optimal incentive schemes is investigated. This is done not only in the above model, but also in a continuous model with outcomes in an interval, which is much more interesting.     

Effect of substitutes in contingent valuation for a private market good

Economic theory predicts a decrease in valuation as the availability of substitutes increases. This paper describes a contingent valuation (CV) survey that investigates the effect of substitutes on valuation of private market goods. Using an approach that compares willingness to pay (WTP) values elicited from a CV question that accounts for substitutes with WTP values elicited from a similar question without substitutes, we find that allowing for substitutes can moderate WTP values. For the item valued in this study, a hamburger sandwich, allowing for substitutes was associated with a reduction of from 10% to 16% in stated values.     

Identifying inconsistent responses in dichotomous choice contingent valuation with follow-up questions

We develop a new but simple non-parametric method to diagnose inconsistency in double-bounded contingent valuation questions in the presence of both perfect and imperfect correlation between initial and follow-up response distributions. The proposed method can identify inconsistency in iterative responses at each bid interval. We apply this method to data from five well-known double-bounded contingent valuation surveys. The predictions of our model match closely with parametric outcomes. Further, we find that the inconsistency patterns generally vary for different data sets and different bid intervals within data sets. Therefore no single behavioral model can explain all latent inconsistency patterns either within or across data sets. In addition, we examine the impact of inconsistency in responses on bias and efficiency of the double-bounded format in the absence of correction for inconsistency. We conclude that the commonly cited benefits of the double-bounded format hold only in the special case of nearly perfect consistency between initial and follow-up response distributions. Our method provides a simple tool researchers can use to determine the similarity in response distributions between the initial and follow-up responses and whether incorporating collected follow-up responses are likely to actually increase efficiency without introducing bias.     

Assessing the impact of nocturia on health-related quality-of-life and utility: results of an observational survey in adults

Background and aim: The impact of nocturia (getting up at night to void) on health-related quality-of-life (HRQoL) is often under-estimated. This study investigated the relative burden in terms of HRQoL and utilities of nocturia in a real-world setting.

Methods: Patient data were collected from two surveys: a nocturia-specific, cross-sectional survey of physicians and their patients (DSP), and a general UK population health survey (HSFE). Utilities (EQ-5D-5L), productivity (Work Productivity and Activity Index), and the impact of nocturia symptoms (Nocturia Impact Diary and Overactive Bladder Questionnaires) were assessed against the number of voids. A robust linear regression model with propensity score weights was used to control for confounding factors in estimating utilities.

Results: Physician-recorded data were available from 8,738 patients across the US, Germany, Spain, France, and the UK; of these, 5,335 (61%) included patient-reported outcomes. In total, 6,302 controls were drawn from the two surveys and compared to 1,104 nocturia patients. Deterioration of HRQoL was associated with increasing number of night-time voids (p?p?p?Limitations: The cause of nocturia is multifactorial and the mostly elderly patients may have several concomitant diseases. The authors tried to adjust for the most common ones, but there may be diseases or unknown relationships not included.

Conclusions: Nocturia negatively affected HRQoL and patient utility. A clear effect is seen already at two voids per night. Every effort should, therefore, be made to reduce nocturia below the bother threshold of two voids per night.     

Disclosure of information in matching markets with non-transferable utility

We present a model of two-sided matching where utility is non-transferable and information about individualsʼ skills is private, utilities are strictly increasing in the partnerʼs skill and satisfy increasing differences. Skills can be either revealed or kept hidden, but while agents on one side have verifiable skills, agents on the other side have skills that are unverifiable unless certified, and certification is costly. Agents who have revealed their skill enter a standard matching market, while others are matched randomly. We find that in equilibrium only agents with skills above a cutoff reveal, and then they match assortatively. We show that an equilibrium always exists, and we discuss multiplicity. Increasing differences play an important role to shape equilibria, and we remark that this is unusual in matching models with non-transferable utility. We close the paper with some comparative statics exercises where we show the existence of non-trivial externalities and welfare implications.     

Testing expected utility maximization under price and quantity risk with a heterogeneous panel

Refutable implications based on the curvature properties of the indirect utility function for the competitive firm operating under uncertainty are extended to the case of both price and quantity uncertainty. Using unit roots and cointegration tests for heterogeneous panels, a model of US agricultural production is developed based on the time-series properties of a panel of state-level data. Most refutable hypotheses under output price and output quantity risk are not rejected, but symmetry conditions implied by a twice-continuously-differentiable indirect utility function are rejected. The same test conclusions are obtained from a traditional model that presumes stationarity in all variables.     

Existence of a continuous utility function with path monotonicity: the Wold approach

Summary This paper uses the approach of Wold to prove the existence of a continuous utility function on a subset ofR ⁿ with a path monotonicity assumption. This result is then extended to a Banach space.The research for this paper was begun while visiting the University of Cambridge and the London School of Economics in 1988. I should like to thank Dr. A. Beardon, Professor M. Desai, Professor L. Foldes and Dr. A. Horsley for their hospitality. Also, I am grateful to an anonymous referee for comments that led to an improvement in the exposition.     

A simple random assignment problem with a unique solution

Summary. All agents have the same ordinal ranking over all objects, receiving no object (opting out) may be preferable to some objects, agents differ on which objects are worse than opting out, and the latter information is private. The Probabilistic Serial assignment, improves upon (in the Pareto sense) the Random Priority assignment, that randomly orders the agents and offers them successively the most valuable remaining object. We characterize Probabilistic Serial by efficiency in an ordinal sense, and envy-freeness. We characterize it also by ordinal efficiency, strategyproofness and equal treatment of equals. Received: October 5, 1999; revised version: December 20, 2000